Year of reckoning: paddy prices fall as Iran goes slow on imports

This five-acre farmer from Behlolpur, a village in Sirhind tehsil of Punjab’s Fatehpur Sahib district, has managed to realise Rs 3,200 per quintal for his Pusa-1121 basmati crop, as against Rs 4,100 last year.

“The artiyas (commission agents) and even other farmers tell me I am lucky. The price I have received is the highest for this season,” he says, half sarcastically.

Kuldeep’s information isn’t wrong.

“Till a couple of weeks back, Pusa-1121 was selling for Rs 2,400-2,500 per quintal. It has since recovered to Rs 3,100, but we are still way below last year’s prices which were Rs 3,000-3,100 around October 10, and reached Rs 4,400-4,500 by the month-end,” says Pritam Singh, who farms 107 acres, including 77 acres taken on lease, at Urlana Khurd in Madlauda tehsil of Panipat.

“Prices this time have generally ranged between Rs 2,400 and Rs 3,200 per quintal,” confirms Kuljinder Singh Sidhu, secretary of the APMC at Rajpura, Punjab’s biggest mandi after Khanna.

According to Wazir Singh Kohar, a 60-acre farmer from Theri village in Fatehabad district of Haryana, traders were blaming the price crash on low export demand: “Jo bhi ho, thaggi ho rahi hai (Whatever be the reason, this is open loot).”

For many farmers, compounding the disappointment is the fact that last year’s record prices had led them to significantly expand basmati acreage, including by leasing in land.

Pargat Singh owns four acres at Kaddon village in Ludhiana’s Doraha tehsil. This year, he rented two acres at Rs 15,000 per acre to plant more area under Pusa-1121. But the returns on that extra investment haven’t matched his expectations.

These stories capture the remarkable phenomenon of a crop that allowed farmers to ride on a wave of high export-driven prices, and simultaneously benefit from new varietal technology.

Pusa-1121, an improved high-yielding basmati developed by the Indian Agricultural Research Institute (IARI), was released for commercial cultivation in the 2003 kharif season.

Between 2003-04 and 2013-14, India’s basmati rice exports zoomed from 7.71 lakh tonnes (lt) to 37.54 lt. The increase was even more in value terms, from $ 433.73 million (Rs 1,993.05 crore) to $4.86 billion (Rs 29,291.82 crore). Pusa-1121’s share in total shipments last year was reckoned at over 70 per cent.

This year, the situation is different.

To start with, export prices have dropped. Parboiled Pusa-1121 rice is currently said to be fetching about $ 1,100 per tonne (landed cost, West Asia), compared to $ 1,400-plus at this time last year and $ 1,700 levels in March.

The main reason for this is Iran, which bought 14.41 lt or over 38 per cent of India’s basmati shipments in 2013-14.

“This year, their own Domsiah crop (a long-grain Iranian aromatic rice similar to basmati) is very good. Also, they have huge stocks from last year’s basmati purchases, prompting the government there to clamp a 40 per cent duty on imports. Lower demand from Iran, plus our farmers growing more basmati this time, is what is depressing prices,” Anil Kumar Mittal, chairman of KRBL, India’s largest rice miller and exporter, told The Indian Express.

India’s basmati paddy production this year is seen at 12 million tonnes (mt), up from the 8.5 mt-9 mt of 2013-14. The 12 mt includes 5 mt of Pusa-1121 and 2.5 mt of Pusa-1509, a newly bred IARI variety. “12 mt paddy works out to 8 mt of rice. If you take 4 mt exports and another 1.8 mt-2 mt domestic consumption, there will still be a surplus of 2 mt,” observed a trade source.

“The bull run in basmati is clearly over. The price correction that is happening now is only a reflection of that,” points out Ashok Gulati, former chairman, Commission for Agricultural Costs and Prices.

R S Seshadri, general secretary of the All India Rice Exporters’ Association, believes farmers in Punjab and Haryana will continue to plant basmati even next year. “With Pusa-1121, a farmer can harvest 18-20 quintals of paddy per acre, which goes up to 23-24 quintals for Pusa-1509. On the other hand, yields in non-basmati parmal varieties, which are procured for the public distribution system and attract a minimum support price of Rs 1,400 per quintal, are only 30 quintals. Even if basmati prices drop to Rs 2,000/quintal, farm economics will still favour it over parmal paddy,” he adds.

The shift to basmati is perceptible from paddy acreage data. Basmati varieties are estimated to have accounted for 8.2 lakh hectares or 72 per cent of Haryana’s total paddy area this year. The corresponding coverage was 8.66 lakh hectares or 31 per cent for Punjab.

“No farmer here grows parmal. The only paddy that comes to our mandi is basmati, especially Pusa-1121 and now increasingly Pusa-1509”, says Vijay Arora, a leading artiya at Madlauda’s new grain market.

Seshadri projects basmati’s share even in Punjab to cross 50 per cent in the next 3-4 years. “It is a good thing, as basmati needs less water, and the government should focus on rice procurement more from Chhattisgarh and eastern India.”